| Wed 30 Apr 2008, 16:00 | | MCU - m Cubed Holdings Limited - Transfer of the i |
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MCU
MCU
MCU - m Cubed Holdings Limited - Transfer of the insurance business
m Cubed Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/014568/06)
Share code: MCU ISIN: ZAE000033353
("m Cubed" or "the company")
TRANSFER OF THE INSURANCE BUSINESS OF m CUBED LIFE LIMITED TO PSG FUTUREWEALTH
LIMITED (FORMERLY ALTERNATIVE CHANNEL LIMITED) IN TERMS OF SECTION 37 OF THE
LONG TERM INSURANCE ACT
1. INTRODUCTION
On 8 October 2007, m Cubed shareholders approved the reinsurance transaction
entered into between m Cubed Life Limited ("mCL"), m Cubed and PSG FutureWealth
Limited ("PSGFW") in terms of which PSGFW reinsured the policyholders book of
mCL from 1 March 2007. As part of m Cubed`s objective of unlocking and
distributing value to m Cubed shareholders, the Section 37 transfer, which
constitutes a disposal in terms of the provisions of Section 228 of the
Companies Act, 1973 (Act 61 of 1973), as amended ("Act") (hereinafter
collectively referred to as "the Section 37 transfer"), represents the next
contemplated step by the board of m Cubed to unwind its assets as set out in
prior announcements and as set out in the circular to shareholders regarding the
reinsurance transaction.
2. DETAILS OF BUSINESS
mCL is a registered life assurance company that provides, inter alia, linked
investment products and portfolios based upon underwritten products. The
Financial Services Board has prohibited mCL from engaging in any new insurance
business and writing of any new policies effective from 19 January 2007, in the
light of administrative and related constraints being experienced by mCL.
3. RATIONALE FOR THE SECTION 37 TRANSFER
mCL remains the last material operational asset in m Cubed. The Section 37
transfer represents the process of the unwinding of mCL, and is in line with m
Cubed`s objective of unwinding and distributing value to m Cubed shareholders.
The Section 37 transfer will involve an application to the High Court of South
Africa to permanently transfer the mCL business, in particular all reinsured
policies to PSGFW. Once the application has been approved by the Court policies
forming part of the mCL business will be permanently transferred to PSGFW and
mCL will unwind its remaining operations (consisting of a few insurance
policies) and be disposed of. The directors are of the opinion that the Section
37 transfer is in the best interest of mCL policyholders and m Cubed
shareholders.
4. SALIENT TERMS OF THE SECTION 37 TRANSFER
Following the implementation of the reinsurance agreement, mCL, m Cubed and
PSGFW ("parties") have further agreed that it would be in their mutual interest
to have the mCL business transferred to PSGFW.
m Cubed Life agreed to transfer the mCL business to PSGFW as a going concern,
free of consideration with effect from the effective date. The effective date
of the transfer is 28 February 2008.
In terms of the aforementioned agreement, mCL will be divested of the mCL
business and the provisions of the reinsurance agreement applicable only to the
contractual principles of reinsurance will upon completion of the transfer cease
and be of no further effect.
PSGFW will for all purposes become the insurer to policyholders.
The parties accept that the mCL is and on the effective date will be an income
earning enterprise, and that the assets which are necessary for carrying on the
mCL business as a going concern are transferred to PSGFW.
PSGFW will take over the employment of the employees of mCL at the effective
date upon the same terms and conditions as they were employed by mCL on the
effective date including all the benefits and other provisions in respect of
their pension fund and medical aid scheme.
PSGFW shall bear the cost of the transfer.
mCL has given warranties to PSGFW that are normal for a transaction of this
nature and the warranties given in terms of the reinsurance agreement in their
entirety also apply to Section 37 transfer agreement.
5. CONDITIONS PRECEDENT
The transfer is subject to the following conditions precedent:
5.1 The approval of the High Court of South Africa under Part V of the Long
Term Insurance Act;
5.2 the approval of the JSE, to the extent required;
5.3 the approval of the SRP, to the extent required;
5.4 the approval of the shareholders of m Cubed Life and m Cubed, by special
resolution and the registration of the special resolution by the Registrar of
Companies.
6. PROSPECTS
Following the Section 37 transfer, m Cubed will have no major operations. The
only remaining material assets in m Cubed are assets that belong to
shareholders. It is the directors` intention, subject to the outcome of the tax
assessment and the dispute with the regulator, as previously disclosed, and the
requisite approvals, to proceed with the process of distributing value to the
shareholders. It is also the intention of the board, after consultation with
the JSE, to lift the voluntary suspension on the trading of m Cubed shares on
the JSE once the outstanding tax assessment against m Cubed Specialised Lending
Services (Pty) Limited has been resolved or progress has been made to have more
certainty regarding such matter.
PSGFW will for all purposes be the insurer to the policyholders of policies
forming part of the mCL business upon the Section 37 transfer becoming
unconditional.
7. OTHER KEY CONSIDERATIONS
PSG Group Limited ("PSG"), through a wholly-owned subsidiary, owns approximately
29% of the issued share capital of m Cubed. PSG also owns 80% of PSGFW. PSG and
its associates are thus deemed to be related parties and are excluded from
voting in terms of the Section 37 transfer.
In terms of the rules of the Securities Regulation Code of the Securities
Regulation Panel, the Section 37 transfer requires appropriate external advice
from an independent professional expert confirming the fairness and
reasonableness of the terms of the Section 37 transfer to m Cubed shareholders
("fair and reasonable opinion"). The details of the fair and reasonable opinion
and the pro forma financial effects have been provided in the circular to be
posted to shareholders as set out in paragraph 9 below.
Furthermore the Section 37 transfer, which constitutes a Section 228 disposal in
terms of the Act, requires by way of special resolution, approval of at least a
75% of votes of m Cubed shareholders (excluding related parties and associates),
who are present in person or by proxy and entitled to vote at such meeting.
8. AMENDMENT IN TERMS OF THE REINSURANCE AGREEMENT
Subsequent to the approval of the reinsurance transaction by shareholders, on 8
October 2007, mCL had to find a solution for its with-profit immediate annuities
referred to as the Inflation Hedged Pension Plan annuities ("the IHPP
Business"). The IHPP Business was not included as part of the original
reinsurance agreement, as only the linked investment business was included in
the said agreement. mCL, finding no other suitable alternative for the IHPP
business, subsequently approached PSGFW with the request that the IHPP Business
be similarly reinsured by PSGFW . The latter had to obtain permission from the
relevant Regulator for the transaction. Accordingly, it was negotiated with
PSGFW to reinsure the IHPP Business (comprising assets of R30 033 621 as at 28
February 2007) in consideration for the payment of a further reinsurance premium
of R1 937 494. PSGFW has the necessary technical expertise and experience to
effectively reinsure and administer these policies. The IHPP Business is
included in the definition of the mCL business transferred to PSGFW in terms of
the Section 37 transfer.
9. CIRCULAR TO m CUBED SHAREHOLDERS
A circular to m Cubed shareholders containing details of the Section 37 transfer
and a notice of a general meeting, at which meeting the m Cubed shareholders
shall be asked to consider and approve the Section 37 transfer, which
constitutes a disposal in terms of the provisions of Section 228 of the Act,
will be mailed to shareholders on or about 3 May 2008.
Stellenbosch
30 April 2008
Exchange Sponsors (Pty) Ltd - Lead sponsor to Section 37 transfer
PSG Capital (Pty) Ltd - Joint sponsor and corporate adviser
Date: 30/04/2008 16:00:02 Produced by the JSE SENS Department.
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